The Fed and Powell's hints: what to expect from the markets in the current cycle

At the current stage, investors should pay close attention not only to the Fed’s decisions regarding interest rates but also to the subtle hints contained in the leadership’s speeches. The market is already pricing in a 95.6% probability of maintaining rates within the 3.50-3.75% range and only a 4.4% chance of rate cuts. This indicates that the committee’s mechanical decision will leave less room for surprise than the rhetoric accompanying this move.

The economic situation remains ambiguous. Growth rates exceed long-term trends, inflation is still above the target range, and the labor market demonstrates strength. That’s why the Fed does not feel an urgency to make sharp changes. The most likely scenario is a short pause in rate decisions, extending into spring, with the first cut not expected before June.

Market Expectations and Base Scenario

If Fed leadership emphasizes economic stability and caution regarding the pace of changes, the market will receive a signal of a gradual approach. In such a scenario, the dollar will hold its positions, and expectations for rate cuts will shift to more distant dates. Investors will interpret this as a signal to hold short positions until clearer signs of economic cooling emerge.

However, there are alternative interpretations. If Powell emphasizes slowing inflation and rising risks in the labor market, even without an official decision to cut rates, the market might interpret this as a hint toward a sooner reversal of monetary policy. In this case, expectations for a March rate cut could activate despite no obvious changes in the current economic assessment.

Where to Look for Signals: Three Stories About Rates

A hawkish scenario involves a focus on persistent inflation, risks from tariff policies, and fiscal stimulus. If Powell signals this, then the possibility of only one rate cut during the year or even a complete pause in 2026 will become reality. The dollar will receive support, and volatility across many assets will increase due to risk reassessment.

A soft interpretation tells a different story. Focusing on easing inflation and acknowledging demand cooling can be seen as a prelude to a June rate cut. Such hints will directly influence the behavior of short- and medium-term traders, amplifying waves of selling and buying of alternative assets.

FOMC Voting: Will There Be a Split?

If more than one vote against the consensus occurs during the vote, it will be a clear sign of a divided committee. Such moments almost always increase volatility in the markets, especially on days when macroeconomic statistics are released. Unanimous voting, on the other hand, signals the Fed’s comfort with current rates and confidence in the chosen course.

BNB and Market Volatility

On a micro level, the BNB asset, currently showing a -9.04% change at 691.32, reacts to macroeconomic fluctuations. Every hint from the Fed is transmitted in waves of crypto asset sell-offs or accumulation. Therefore, closely monitoring Powell’s tone and the structure of his responses to investors remains critical for predicting short- and medium-term market movements.

The simple conclusion: the decision itself will matter less than the hints the Fed conveys alongside it. Markets are waiting to understand how the regulator perceives the balance between inflation and employment, and when it will truly be ready to make changes.